NB: This blog post is NOT directed against any company, person or group(s) in particular. In fact, I myself have purchased over 25+ items from Jabong.com in the past 4 months. 🙂 Customer Service is impeccable.
This promotional mailer from Indian e-retailer Jabong.com (Rocket Internet venture launched in late 2011 in India) pretty much sums up the current state of things in the Indian e-Commerce industry. An Indianized version of Latin, “Veni Vidi Vici” as reportedly written by Julius Caesar in 47 BC as a comment on his short war with Pharnaces II of Pontus in the city of Zela (source); the Jabong.com mailer says – “I came, I saw, I shopped a Lott!!.
Forgot to mention – as always, at a % discount OFF. In this case, FLAT 50% OFF.
Other times, its buy 1 get something free, or buy 1 get x percentage off, buy 2 get x+y percentage off and so on.
The issue lies in the fact (in the following quantitative questions) –
> I came, I saw, I shopped a lot – then what?
> When do I come back again, say “t” days/weeks/months?
> If my initial CPA (cost per acquisition for new customer is $x), then on returning after t months, do I make up for the $y capital expenditure (loss) that I gave as discount in the first purchase?
> If my initial CPA is $x, then what’s 2nd, 3rd, 4th, 5th time CPAs?
> If my initial CPA is $x, and my capital expenditure was $y, how do I plan to write this off in my accounting books?
> And most importantly of all, whats the guarantee, this chap will ever come back?
Practically speaking, no Chief Marketing Officer (CMO) of any e-commerce portal in India, knows the answer to these questions. Thus, none of the sites have a decent Referral program (only exception being Fashion&You.com and SherSingh Referral Program), and none have a Loyalty program in place. Discounts, discounts, and discounts is the only battle strategy for all the Dot.coms in India.
Result – After burning $181 million, Flipkart is still clocking 45,000 orders a day; with 60% or more being books/USBs. And yet running Q in negative margins. When will it break even? No one practically knows. Thus, questions arise, can Jabong sustain the current rate of burning cash? And making transactions YET losing massively in ‘unit level transactions’? Only God almighty knows. They will survive till cash runs out; and once it does then………….. Fate of Taggle.com & LetsBuy.com.
2013-2014 would be a tough year for most Dot.coms in India.
Loyalty & impeccable customer service will play an important role for survival in the EU & US downturn(s).
Can Rocket Internet pull it off in India? Am not convinced with the current business model of acquiring customers and providing discounts.
By “building loyalty” – definitely yes.
Only time shall tell.
Not sure what Julius Caesar would say about this. 🙂
Reading, Books & More 
Dude, how is Shersingh any different? Just because you work for them.. I just remember seeing their “anything for 600” mailer from them! And, you don’t seem to know the true state of affairs of fashionandyou!!
Hi Kushal… SS is not different in any way. In fact, if you read carefully, you shall see, I have mentioned the “current norm” across ALL e-commerce portals. Just picked this mailer since its a pun – “Veni, Vidi, Vici”. As mentioned, NONE of the Marketing guys can answer those questions mentioned there.
So wished to clarify – am not pointing out Jabong.com here for any reason. Have just picked the mailer since it exemplifies the current scenario well.
As for F&Y, well, I do know a few Senior members thereat; and not interested in how they’re performing or what they are doing. Have mentioned their referral program only.
Thanks,
Subhasish
Indian customers are no different from customers of any other demographic…The only difference is we are enticed by discount others are enticed by services 🙂
Completely agree. But I wish to differ on one point which I have observed in the West – people are a bit more concerned about “quality”. Whereas in India and in the Indian subcontinent; people at times choose to opt for discounts/coupons etc, even if they are aware that the quality wouldn’t be pristine. So, yeah, in India, unless you’re marketing a product for the super premium class, discounts definitely do matter.
Well loyalty programs would be just great,but as of now my favourite is jabong simply because of their delivery service.They are ridiculously fast.I mean delivery on the same day in NCR. Just for that i think they have earned some loyalty.
Definitely. CUSTOMER SERVICE and quick delivery are 2 of the core aspects of branding and building brand loyalty. I haven’t ordered anything so far from Jabong.com from outside New DELHI, but have ordered more than 15-20 items so far from New Delhi – except for 2 cancellations which they managed to tell me after a few days; overall delivery timings is perfect. sometimes same day or next day delivery in New DELHI. That is simply unbeatable.
You are right about e-commerce companies not being able to make a profit for a while at least.But I don’t think its that much of an issue for jabong because of their German backing.They have a hell of of a lot of money as we can see from their huge advertisement campaign.
Thanks for the comment. Its not about the backing; nearly all or 99% of Indian eCommerce companies currently operating in India have excellent VC funding; some of them ensured for forth-coming many years; but thats where it gets tricky. Investors are not running charities or NGOs; thus, sooner or later, once a certain period of time has elapsed, they will ask for returns. In fact, the German backing which you spoke of; are even more so. They open companies, fund it heavily and if not breaking even in a few years; always choose to exit. This has been their style of running since ages. Thus, sooner or later, any VC will eventually wish to see positive margins, at least making profits on “unit level transactions”.
Well Jabong seems to have it pretty rough then.How long do you thing they will take before level transactions?Think the’ll get axed before that?
Dude. Tough question to answer. Matter of the fact is – when investors for a company, say, A wish to invest in a company online, say, brandX. Investors always assume that for forth-coming 4 years or 5 years or 8 years there would be 0 PROFIT. So margins would be either 0 or negative. But the important thing is – “cash flows of the company”; i.e. as time passes, the cash flows outward should decrease, and incoming should increase; which means – gradually the company breaks even –
a) at unit level transactions
b) then someday at overall business (with margins included).
Jabong is right now burning 45 Crores EVERY MONTH in ad spending; Fashion&You 12 Crores EVERY MONTH; and so on.
Depending on company – how long they are ready to cut losses. Its synonymous to poker in Hollywood movies. 4 guys putting bets, when you not sure of how much loss you can sustain, you call for cards to show or say, “i quit”.
As of now, Jabong.com has deep pockets. Maybe, they decided, we will waste $100 million MAX for 5 years in India. After that is the P&L statement still shows LOSS, then its time to call.
So don’t know about Jabong.com; but am 100000% sure every company & Investors have a mental calculations.
Totally agreed with you on investors point of view. Just heared that flipkart has secured fourth round of funding…Any comments ?
Nope. Good for them. Hope they cut down on spending, acquiring new warehouses, and instead focus on their core competencies (if any). Soon, they’re launching clothing – so practically, introducing categories has become the secret of scaling, as of now. Not sure this process can be infinite forever.
That’s great information. Its good analysis on the ecommerce site. I have ordered one puma shoes from Yuvastyle.com. Service is amazing from Yuvastyle. I ll be looking to buy more from them.